- TI Revenue Increases 6% Sequentially, 34% from Year Ago
- Gross Profit Increases 11% Sequentially, 53% from Year Ago
- EPS of $0.21
- 2Q04 Revenue Expected between $3085 Million and $3325 Million
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Financials in MS Excel Format (51KB)
DALLAS (April 14, 2004) – Texas Instruments Incorporated (TI) (NYSE:
TXN) today reported first-quarter 2004 revenue of $2936 million, an increase
of 6 percent sequentially and 34 percent from the year-ago quarter due
to strength in TI’s Semiconductor business. Earnings per share (EPS)
were $0.21.
Semiconductor revenue increased 5 percent sequentially due to strong demand
across a broad range of products, especially Digital Light Processing™
(DLP™) and high-performance analog. Growth in these areas more than
offset a decline in revenue from wireless applications. TI's wireless
revenue was the second highest on record despite the combination of normal
handset seasonality and lower demand from TI's largest customer.
Compared with the year-ago quarter, Semiconductor revenue increased
38 percent due to demand across a broad range of products, particularly
digital signal processors (DSPs) and analog used in wireless, as well
as high- performance analog used in a variety of applications. Wireless
revenue increased 35 percent from the year-ago quarter driven by demand
for TI's most advanced products. High-performance analog revenue increased
58 percent from the year-ago quarter.
"The growth in Semiconductor revenue demonstrates the diversity in
our customer base and our product portfolio," said Tom Engibous, TI
chairman, president and CEO. "Shipments increased across most product
lines and end markets. Notably, high-performance analog and DLP are
both becoming major contributors to TI's growth and bottom line. Revenue
from DLP products reached a record level as TI's technology continued
to penetrate the business projector and high-definition television markets
with an increasing array of customer brands and retail presence. Growth
in high-performance analog reflected the significant investments we've
made to establish a world-class development team and the quality of
products this team has delivered.
"TI's strong wireless growth from the year-ago period continued to
outpace the industry's handset shipments, which we believe reflects
the company's increasing content per phone. A big factor in this growth
was TI's family of OMAP™ application processors, used to enable
real multimedia capabilities in smartphones and 3G handsets," Engibous
said.
“In all, the strength in customer orders and the continuing momentum
of TI products lead us to believe that 2004 will be another strong year
for our Semiconductor business. For the first time since 2000, we accrued
for TI employee profit sharing, reflecting the company’s expectations
for strong growth and improving profitability,” he said. “We
are increasing R&D and also are adding capacity for additional assembly
and test capabilities and an additional 90-nanometer manufacturing line.
These actions will help ensure we can provide customers what they need,
when they need it.”
Details of Financial Results
Revenue
In the first quarter, TI revenue of $2936 million increased by $166
million sequentially and by $744 million from the year-ago quarter.
Gross Profit
Gross profit of $1322 million increased 11 percent sequentially and
53 percent from the year-ago quarter. Gross profit margin was 45.0 percent
of revenue, up 1.9 percentage points sequentially and up 5.7 percentage
points from the year-ago quarter. Gross profit and gross profit margin
benefited from higher revenue and the resulting increased utilization
of TI's fixed-cost Semiconductor manufacturing assets. This more than
offset the accrual for profit sharing and the annual compensation expense
increases that were incurred in the first quarter.
Operating Expenses
Research and Development (R&D) expense of $494 million increased
10 percent sequentially primarily due to an accrual for profit sharing
and annual compensation expense increases that were incurred in the
first quarter. R&D expense increased 21 percent compared with the
year-ago quarter primarily due to higher Semiconductor product development,
particularly for wireless, combined with the profit sharing accrual
and the annual compensation expense increases.
Selling, General and Administrative (SG&A) expense of $354 million
increased 15 percent sequentially and 18 percent from the year-ago quarter
primarily due to the accrual for profit sharing and the annual compensation
expense increases.
Operating Profit
Operating profit of $474 million, or 16.2 percent of revenue, increased
by $36 million sequentially and increased by $321 million compared with
the year- ago quarter due to higher gross profit, which more than offset
increased R&D and SG&A expenses.
Other Income (Expense) Net (OI&E) and Interest Expense
OI&E of $50 million decreased by $81 million from the prior quarter,
which included $97 million of pre-tax gain associated with the company's
sale of its remaining shares of Micron Technology, Inc. common stock.
Compared with the year-ago quarter, OI&E increased $36 million reflecting
TI's investment write- downs and the charges associated with the retirement
of Burr-Brown debt, both of which occurred in the year-ago quarter.
Interest expense of $8 million was even sequentially and declined by
$5 million from the year-ago quarter due to the company's lower debt
level.
Net Income
Net income was $367 million, or $0.21 per share, down $145 million
sequentially due to the prior quarter's gain from the sale of Micron
stock and the company's recognition of a previously reserved tax benefit
associated with an impairment write-down of TI's Micron stock in the
fourth quarter of 2002, and due to an increase in the company's effective
tax rate. Compared with the year-ago quarter, net income increased $250
million due to higher operating profit. Net income in the first quarter
reflects a higher effective tax rate of 29 percent compared with the
earlier periods.
Orders
TI orders of $3231 million increased 5 percent sequentially due to
growth in Semiconductor, Education Technology (E&PS) and Sensors
& Controls. Compared with the year-ago quarter, orders increased
41 percent primarily due to strength in Semiconductor. Semiconductor
orders were $2810 million, up 2 percent sequentially. Compared with
the year-ago quarter, Semiconductor orders were up 47 percent due to
broad-based demand for the company's products. The Semiconductor book-to-bill
ratio in the first quarter was 1.09.
Cash
At the end of the first quarter, total cash (cash and cash equivalents
plus short-term investments and long-term cash investments) was $5493
million.
Cash flow from operations was $393 million, down $674 million sequentially
primarily due to an increase in receivables and inventory. Compared
with the year-ago quarter, cash flow was up $197 million due to higher
net income.
Capital Expenditures and Depreciation
Capital expenditures of $401 million increased by $129 million sequentially
and $269 million from the year-ago quarter. TI's capital expenditures
in the first quarter primarily were used to increase assembly and test
capacity, as well as for Semiconductor equipment to establish an additional
90-nanometer production line.
Depreciation of $348 million decreased by $22 million sequentially
and was about even with the year-ago quarter.
Accounts Receivable and Inventory
Accounts receivable of $1678 million increased $227 million sequentially
due to a higher revenue level in the final month of the first quarter
compared with the final month of the prior quarter. Accounts receivable
increased by $313 million from the end of the year-ago quarter due to
higher revenue. Days sales outstanding were 51 at the end of the first
quarter, compared with 47 at the end of the prior quarter and 56 at
the end of the year-ago quarter.
Inventory of $1148 million at the end of the first quarter increased
$164 million sequentially and $266 million from the year-ago quarter
to support anticipated higher shipments. Days of inventory at the end
of the first quarter were 64, up from 56 days at the end of the prior
quarter and up from 60 days at the end of the year-ago quarter.
Debt
At the end of the first quarter, TI's debt-to-total-capital ratio was
0.06, down from 0.07 at the end of the prior quarter, and down from
0.09 at the end of the year-ago quarter primarily due to the company's
lower debt level.
Outlook
TI intends to provide a mid-quarter update to its financial outlook
on June 7 by issuing a press release and holding a conference call.
Both will be available on the company's web site.
For the second quarter of 2004, TI expects revenue to be in the following
ranges:
- Total TI, $3085 million to $3325 million;
- Semiconductor, $2650 million to $2850 million;
- Sensors & Controls, $280 million to $300 million; and
- E&PS, $160 million to $180 million.
TI expects earnings per share to be in the range of $0.23 to $0.26.
For 2004, TI expects: R&D to be about $2.1 billion, up from the prior
estimate of $2.0 billion; capital expenditures to be about $1.3 billion,
up from the prior estimate of $1.1 billion; and depreciation to be about
$1.5 billion, up from the prior estimate of $1.4 billion.
The effective tax rate for the year is expected to be about 29 percent,
compared with the company's prior expectation of about 30 percent.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statement of Operations
(In millions of dollars, except per-share amounts)
For Three Months Ended
Mar. 31 Dec. 31 Mar. 31
2004 2003 2003
Net revenue $2936 $2770 $2192
Operating costs and expenses:
Cost of revenue 1614 1576 1330
Gross profit 1322 1194 862
Gross profit % of revenue 45.0% 43.1% 39.3%
Research and development (R&D) 494 448 408
R&D % of revenue 16.8% 16.2% 18.6%
Selling, general and
administrative (SG&A) 354 308 301
SG&A % of revenue 12.0% 11.1% 13.7%
Total 2462 2332 2039
Profit from operations 474 438 153
Operating income % of revenue 16.2% 15.8% 7.0%
Other income (expense) net 50 131 14
Interest on loans 8 8 13
Income before income taxes 516 561 154
Provision for income taxes 149 49 37
Net income* $ 367 $ 512 $ 117
Diluted earnings per common
share** $ .21 $ .29 $ .07
Basic earnings per common share $ .21 $ .30 $ .07
Cash dividends declared per share
of common stock $.021 $.021 $.021
*Income for the first quarter of 2004 includes, in millions of dollars,
a charge of $5 for restructuring actions initiated in the second quarter
of 2003, of which $2 is associated with achieving manufacturing efficiencies
in the Semiconductor business and $3 is associated with moving certain
production lines in the Sensors & Controls business from Attleboro
to other TI sites. The $5 restructuring charge is primarily for severance
and benefit costs. Of the $5, $4 is included in cost of revenue and $1
is in selling, general and administrative expense. Income for the fourth
quarter of 2003 includes, in millions of dollars, a charge of $13 for
restructuring actions initiated in the second quarter of 2003, of which
$7 is associated with achieving manufacturing efficiencies in the Semiconductor
business and $6 is associated with moving certain production lines in
the Sensors & Controls business from Attleboro to other TI sites.
The $13 restructuring charge is primarily for severance and benefit costs.
Of the $13, $11 is included in cost of revenue and $2 is in selling, general
and administrative expense. Income for the fourth quarter of 2003 also
includes an investment gain of $97, included in other income, from the
sale of 32.3 million shares of Micron Technology, Inc. (Micron) common
stock. Income for the first quarter of 2003 includes, in millions of dollars,
a charge of $10 in other income (expense) net from the redemption of $250
million in convertible notes.
Income includes, in millions of dollars, acquisition-related amortization
of $19, $20 and $28 for the first quarter of 2004 and the fourth quarter
and first quarter of 2003.
** Diluted earnings per common share are based on average common and dilutive
potential common shares outstanding (in millions of shares, 1783.6, 1780.1
and 1753.4 for the first quarter of 2004 and the fourth quarter and first
quarter of 2003).
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheet
(In millions of dollars)
Mar. 31 Dec. 31 Mar. 31
2004 2003 2003
Assets
Current assets:
Cash and cash equivalents $ 1615 $ 1818 $ 1089
Short-term investments 2522 2511 1847
Accounts receivable, net of
allowances for customer
adjustments and doubtful
accounts of $44 million at
March 31, 2004, $47 million
at December 31, 2003, and
$62 million at March 31, 2003 1678 1451 1365
Inventories:
Raw materials 126 106 107
Work in process 692 624 546
Finished goods 330 254 229
Inventories 1148 984 882
Deferred income taxes 490 449 560
Prepaid expenses and other
current assets 545 496 379
Total current assets 7998 7709 6122
Property, plant and equipment
at cost 9738 9549 9438
Less accumulated depreciation (5550) (5417) (4862)
Property, plant and equipment
(net) 4188 4132 4576
Long-term cash investments 1356 1335 1209
Equity investments 260 265 717
Goodwill 693 693 638
Acquisition-related intangibles 154 169 171
Deferred income taxes 524 626 622
Other assets 612 581 340
Total assets $15785 $15510 $14395
Liabilities and Stockholders' Equity
Current liabilities:
Loans payable and current
portion long-term debt $ 435 $ 437 $ 168
Accounts payable and accrued
expenses 1553 1496 1170
Income taxes payable 210 250 329
Accrued retirement and profit
sharing contributions 82 17 11
Total current liabilities 2280 2200 1678
Long-term debt 394 395 832
Accrued retirement costs 620 628 783
Deferred income taxes 57 59 98
Deferred credits and other
liabilities 349 364 275
Stockholders' equity:
Preferred stock, $25 par value.
Authorized - 10,000,000 shares.
Participating cumulative
preferred. None issued. --- --- ---
Common stock, $1 par value.
Authorized - 2,400,000,000 shares.
Shares issued: March 31, 2004 -
1,738,115,567; December 31, 2003 -
1,737,739,654; March 31, 2003 -
1,740,467,816 1738 1738 1740
Paid-in capital 859 901 1011
Retained earnings 9865 9535 8564
Less treasury common stock
at cost:
Shares: March 31, 2004 -
7,012,862; December 31, 2003 -
5,401,665; March 31, 2003 -
11,185,274 (200) (135) (228)
Accumulated other comprehensive
income (loss) (164) (159) (328)
Deferred compensation (13) (16) (30)
Total stockholders' equity 12085 11864 10729
Total liabilities and
stockholders' equity $15785 $15510 $14395
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Statement of Cash Flows
(In millions of dollars)
For Three Months Ended
Mar. 31 Dec. 31 Mar. 31
2004 2003 2003
Cash flows from operating
activities:
Net income $ 367 $ 512 $ 117
Depreciation 348 370 346
Amortization of
acquisition-related costs 19 20 28
Write-downs of equity investments 5 8 12
Gains on sale of equity
investments (7) (99) ---
Deferred income taxes (17) 174 (13)
(Increase) decrease in working
capital (excluding cash and cash
equivalents, short-term
investments, deferred income taxes,
and loans payable and current
portion long-term debt):
Accounts receivable (227) 85 (160)
Inventories (164) 11 (92)
Prepaid expenses and other
current assets (97) (93) (70)
Accounts payable and accrued
expenses 58 48 (35)
Income taxes payable 105 112 38
Accrued retirement and profit
sharing contributions 65 15 (9)
Increase (decrease) in noncurrent
accrued retirement costs (64) 6 4
Other 2 (102) 30
Net cash provided by operating
activities 393 1067 196
Cash flows from investing activities:
Additions to property, plant
and equipment (401) (272) (132)
Purchases of short-term
investments (496) (640) (493)
Sales and maturities of
short-term investments 910 741 1131
Purchases of long-term cash
investments (493) (445) (560)
Sales of long-term cash
investments 44 90 67
Purchases of equity investments (2) (3) (10)
Sales of equity investments 11 414 ---
Net cash provided by (used in)
investing activities (427) (115) 3
Cash flows from financing activities:
Payments on loans payable (1) --- (5)
Payments on long-term debt --- (3) (256)
Dividends paid on common stock (37) (36) (37)
Sales and other common stock
transactions 42 77 16
Common stock repurchase program (172) (115) (48)
Decrease in current assets for
restricted cash --- --- 261
Net cash used in financing
activities (168) (77) (69)
Effect of exchange rate changes
on cash (1) --- 10
Net increase (decrease) in cash
and cash equivalents (203) 875 140
Cash and cash equivalents at
beginning of period 1818 943 949
Cash and cash equivalents at end
of period $1615 $1818 $1089
Business Segment Net Revenue
(In millions of dollars)
For Three Months Ended
Mar. 31 Dec. 31 Mar. 31
2004 2003 2003
Semiconductor
Trade $2573 $2444 $1863
Intersegment 1 3 4
2574 2447 1867
Sensors & Controls
Trade 283 251 252
Intersegment 1 1 1
284 252 253
Education Technology
Trade 79 76 77
Corporate activities (1) (5) (5)
Total net revenue $2936 $2770 $2192
Business Segment Profit
(In millions of dollars)
For Three Months Ended
Mar. 31 Dec. 31 Mar. 31
2004 2003 2003
Semiconductor $465 $433 $147
Sensors & Controls 75 64 61
Educational & Productivity
Solutions 9 11 15
Corporate activities (51) (38) (42)
Charges/gains and
acquisition-related amortization (24) 65 (38)
Interest on loans/other income
(expense) net, excluding a
fourth-quarter 2003 gain of $97
and a first-quarter 2003 charge
of $10 included above in
Charges/gains and
acquisition-related amortization 42 26 11
Income before income taxes $516 $561 $154
Semiconductor
-
In the first quarter, Semiconductor revenue of $2574 million increased
5 percent sequentially as higher demand across a broad range of products,
particularly DLP and high-performance analog, offset a decline in
wireless demand that reflected seasonal factors and lower demand from
TI's largest customer. Revenue increased 38 percent from the year-ago
quarter primarily due to demand across a broad range of products,
particularly DSP and analog products used in the wireless market,
as well as high-performance analog products.
-
Gross profit was $1188 million, or 46.2 percent of revenue, an increase
of $105 million from the prior quarter and $440 million from the year-ago
quarter. Gross profit margin increased 2.0 percentage points sequentially
and 6.2 points from the year-ago quarter. Gross profit and gross profit
margin benefited from higher revenue and the resulting increased utilization
of TI's fixed-cost Semiconductor manufacturing assets. This more than
offset the accrual for profit sharing and the annual compensation
expense increases that were incurred in the first quarter.
-
Semiconductor operating profit was $465 million, or 18.1 percent of revenue,
up $32 million sequentially and $318 million from the year- ago quarter
due to higher gross profit, which more than offset increased R&D
and SG&A expenses.
-
Analog revenue increased 9 percent sequentially primarily due to higher
demand for high-performance analog products, and increased 42 percent
from the year-ago quarter primarily due to higher demand for high-performance
and wireless analog products. Revenue from TI's high-performance analog
products increased 14 percent sequentially and 58 percent from the
year-ago quarter due to higher demand.
-
DSP revenue decreased 6 percent sequentially and increased 35 percent
from the year-ago quarter primarily due to demand in the wireless
market. Catalog DSP revenue grew 33 percent sequentially and 49 percent
compared with the year-ago quarter due to higher demand.
-
TI's remaining Semiconductor revenue increased 16 percent sequentially
primarily due to higher demand for DLP products. Compared with the
year-ago quarter, this revenue increased 35 percent due to higher
demand across a broad range of products.
-
Results for TI Semiconductor products sold into key end equipments were
as follows:
-
Wireless revenue decreased 5 percent sequentially reflecting the combination
of normal handset seasonality and lower demand from TI's largest
customer. Compared with the year-ago quarter, this revenue increased
35 percent due to higher demand for the company's most-advanced
wireless products, including 2.5G modems and OMAP application
processors.
-
Broadband communications revenue, which includes DSL and cable modems,
voice over packet (VoP) and wireless LAN (WLAN), increased 15
percent sequentially and 105 percent compared with the year-ago
quarter due to higher demand, especially for the company's DSL
products
-
Semiconductor orders were $2810 million, up 2 percent sequentially. Compared
with the year-ago quarter, Semiconductor orders were up 47 percent
due to broad-based demand for the company's products.
-
TI unveiled OMAP 2 "All-in-One Entertainment" processors for 2.5G and
3G mobile phones. These next-generation OMAP products will enable
handset features such as digital video camcorders, Dolby Digital™-quality
sound, interactive 3D gaming, DVD-quality video, 4+ megapixel cameras,
television reception and more.
-
TI disclosed a breakthrough approach to wireless chip design that applies
digital technology to radio frequency (RF) processing in portable
wireless devices. The new approach reduces power consumption, die
area and required board space each by up to 50 percent compared with
traditional analog RF designs.
-
TI introduced a broadband residential gateway reference design that combines
DSL, Voice over Internet Protocol (VoIP) and 802.11b/g WLAN into a
single cost-effective system.
-
Thomson announced new HDTV models that bring DLP products into the flat-panel
category. Just 6.85 inches deep, the new RCA Scenium Profiles HDTV
comes in 50-inch and 61-inch screens.
-
TI disclosed details of the company's next-generation 65-nanometer semiconductor
manufacturing process, which, compared with TI's advanced 90-nanometer
process, increases transistor performance by 40 percent while integrating
hundreds of millions of transistors that support both analog and digital
functions in single-chip system solutions. The first product built
in this new process is expected to sample in the first quarter of
2005.
-
Sensors & Controls revenue was $284 million, up 13 percent sequentially
and 12 percent from the year-ago quarter due to higher demand across
a broad range of product lines.
-
Gross profit was $110 million, or 38.8 percent of revenue, an increase
of $15 million from the prior quarter primarily due to higher revenue,
and up by $20 million compared with the year-ago quarter primarily
due to reduced manufacturing costs.
-
Operating profit was $75 million, or 26.5 percent of revenue, an increase
of $11 million sequentially and $14 million from the year-ago quarter
due to higher gross profit.
Educational & Productivity Solutions (E&PS)
-
E&PS revenue was $79 million, up $3 million sequentially and $2
million from the year-ago quarter.
-
Gross profit was $37 million, or 47.0 percent of revenue, about even
sequentially and compared with the year-ago quarter.
-
Operating profit was $9 million, or 11.0 percent of revenue, a decrease
of $2 million from the prior quarter and $6 million from the year-ago
quarter reflecting costs associated with discontinued development
activity for a new product.
###
"Safe Harbor" Statement under the Private Securities Litigation Reform
Act of 1995: This release includes forward-looking statements intended
to qualify for the safe harbor from liability established by the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
generally can be identified by phrases such as TI or its management "believes,"
"expects," "anticipates," "foresees," "forecasts," "estimates" or other
words or phrases of similar import. Similarly, statements in this release
that describe the company's business strategy, outlook, objectives, plans,
intentions or goals also are forward-looking statements. All such forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those in forward-looking statements.
We urge you to carefully consider the following important factors that
could cause actual results to differ materially from the expectations
of the company or its management:
- Market demand for semiconductors, particularly for analog chips and
digital signal processors in key markets, such as telecommunications
and computers;
- TI's ability to maintain or improve profit margins, including its
ability to utilize its manufacturing facilities at sufficient levels
to cover its fixed operating costs, in an intensely competitive and
cyclical industry;
- TI's ability to develop, manufacture and market innovative products
in a rapidly changing technological environment;
- TI's ability to compete in products and prices in an intensely competitive
industry;
- TI's ability to maintain and enforce a strong intellectual property
portfolio and obtain needed licenses from third parties;
- Consolidation of TI's patent licensees and market conditions reducing
royalty payments to TI;
- Timely completion and successful integration of announced acquisitions;
- Economic, social and political conditions in the countries in which
TI, its customers or its suppliers operate, including security risks,
health conditions, possible disruptions in transportation networks and
fluctuations in foreign currency exchange rates;
- Losses or curtailments of purchases from key customers or the timing
of customer inventory adjustments;
- Availability of raw materials and critical manufacturing equipment;
- TI's ability to recruit and retain skilled personnel;
- Fluctuations in the market value of TI's investments and in interest
rates; and
- Timely implementation of new manufacturing technologies, installation
of manufacturing equipment, and the ability to obtain needed third-party
foundry and assembly/test subcontract services.
For a more detailed discussion of these factors, see the text under
the heading "Cautionary Statements Regarding Future Results of Operations"
in Item 1 of the company's most recent Form 10-K. The forward-looking
statements included in this release are made only as of the date of
publication, and the company undertakes no obligation to update the
forward-looking statements to reflect subsequent events or circumstances.
Texas Instruments Incorporated provides innovative DSP and Analog technologies
to meet our customers' real world signal processing requirements. In
addition to Semiconductor, the company's businesses include Sensors
& Controls and Education Technology. TI is headquartered in Dallas,
Texas, and has manufacturing, design or sales operations in more than
25 countries.
Texas Instruments is traded on the New York Stock Exchange under the
symbol TXN. More information is located on the World Wide Web at www.ti.com
.
TI Trademarks:
OMAP
Digital Light Processing
DLP
Other trademarks are the property of their respective owners.
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